ISLAMABAD - Illicit cigarette trade is not only damaging the legal cigarette industry but also causing a loss of Rs 44 billion annually to the national exchequer.

Everybody will tell you who is doing the illicit cigarette business but nobody is taking  action against the companies involved in that business, said an official of multinational tobacco company here while talking to media. The size of illicit trade is increasing in the country from earlier 13 percent to 42 percent of the legal business, he said.

The official said that the government instead of maintaining laws to control illicit cigarette trade and generating Rs 44 billion is reversing the laws controlling illicit trade and at the same time is trying to generate additional revenue from taxing the salaried class, increasing price of electricity and fuel.

He said that in fiscal year 2015-16 tobacco excise revenues were Rs 111 billion. For fiscal year 2016-17 excise rates per thousand cigarettes were set at 1,649 pushing the price of legal cigarettes to Rs 70 per pack while illicit cigarette packs were available for an average of Rs 30. As a result the government for the first time witnessed a catastrophic drop in government revenues to Rs 74 billion. Now let’s look at the current scenario just two years down the road in fiscal year 2018-19 tobacco excise revenues are expected to be Rs 114 billion.

Illicit packs still available at average rate of Rs30

For fiscal year 2019-20 excise rates per thousand cigarettes is set at 1,650 once again pushing the price of legal cigarettes to Rs 70 per pack while illicit cigarette packs are still available for an average of Rs 30.

The only solution that remains is to ensure strict enforcement and controls on illicit trade. And the government did make an attempt by introducing a supply chain control on tobacco whereby tobacco manufacturers were required to pay an advance tax of Rs 300 per kilo of processed tobacco. But now the government succumbed to the pressure from illicit cigarette manufacturers and removed the one control that was introduced in September 2018 and with that hope to control illicit cigarette vanished into thin air.  If the government cannot even exercise its writ to control maintain the laws to control illicit trade and ends up reversing those laws just to protect the illicit traders how can anyone expect that there is actually any political will to clamp down on illicit trade.

Is that up till now the issue with illicit trade was lack of enforcement of existing laws which facilitated illicit cigarette trade. For the first time the legal industry is witnessing a “reversal” of laws for the mere protection and accelerate the growth of illicit cigarettes in Pakistan.

Illicit cigarette trade is responsible for the loss of Rs 44 billion each year and the government instead of maintaining laws to control illicit cigarette trade and generating Rs 44 billion is reversing the laws controlling illicit trade.

When asked that why the people fears that Philip Morris is going out of business he said that the company has 100s of millions of dollars investment and it has no intention to leave the place. He said that year they buy 10 percent more tobacco then previous year. In reply to another query he said that when they have purchased business from Lekson tobacco there were four factories but due to illicit trade they have to close down three factories.